March 03, 2010

Tool Belt Recession

by Eileen Weber

A plumber was called to a neurosurgeon’s house to fix a leaky faucet. After a few minutes, the plumber finished and gave the neurosurgeon the bill. The total was $150. A little hot under the collar, the neurosurgeon exclaimed, 'I don't even get this much as an hourly rate!" The plumber replied, "I didn't either when I was a surgeon. That's why I became a plumber."

Cute. But not necessarily accurate. Plumbers, electricians, and builders alike have all been hit hard with the recession. And, it looks like it may take a while before that changes.

According to a recent press release from the Center for American Progress, Connecticut’s construction industry has been reeling since December, 2008. While reports that the economy is starting to percolate, there are many who aren’t feeling any financial impact. With the national unemployment rate peaking at 10%, the unemployment rate for construction, both commercial and residential, is more than double.

The statistics are alarming: The unemployment rate for experienced workers in construction was 24.7 percent in January 2010; Total construction payroll employment has dropped by 2.1 million jobs since 2006, with residential construction down by 1.3 million, or 38%; For 2009, 12.4 percent of all unemployed workers were previously employed in the construction industry; There have been 134,000 jobs lost (10%) in construction-related retail, such as building supply stores and lumber yards, since December 2007, with 186,000 lost (14%) since July 2006.

Based on an article by Peter Morici, Professor of International Business at the University of Maryland and former Director of Economics at the U.S. International Trade Commission, construction business seems to have missed out on the $789 billion stimulus package. The article, which appeared in Seeking Alpha, a market analysis web site with over 3,000 expert contributors, highlighted a pessimistic view of the job market as a “double dip” recession. This would have an effect on construction as well as manufacturing, which have consistently shed jobs during the recession, and lost 75,000 in January.

Commercial building accounts for the biggest percentage of construction. However, residential construction is not immune. Morici pointed out that it remains quite weak even though it comprises only a quarter of the construction sector. That said, if the stimulus funds are to make a dent, it must first impact commercial construction.

The unemployment rate is steep in every state. In today’s New York Times, the state of Oregon has maintained a flat rate of unemployment for the last three months. Only construction was an area that showed a downslide. In January, 1,600 jobs were cut.

Tim Duy, a University of Oregon economist, said the job loss in construction was a sign of recovery, however slow and painful that might be. ''At this rate of change, the road to recovery is very long and arduous,'' he said. Duy also pointed out that Oregon has seen little overall job growth for the past ten years.

“The tool belt recession is devastating. There is an urgent need in every state of the union to generate skilled, high-paying, long-term construction and manufacturing jobs to grow our economy,” said Matt Golden, CEO of Recurve, a home performance retrofit contractor and co-author of the recent study on construction jobs.

This “tool belt recession” has a broader effect than just the construction industry. It has a ripple effect with all the other industries that rely on construction, like manufacturing for instance. Factories, many of them running at half capacity, have seen an employment decrease of about 20% to 30% because the demand for parts has diminished.

It also has a community effect. All those workers who are currently jobless won’t help grow their local economy. Not surprisingly, local business suffers when local residents are jobless.

But there is hope, says Golden. Energy efficiency programs have provided some much needed employment in area’s like Golden’s home state of California. “As an employer in the hard-hit state of California, I have seen my efficiency business grow by 60 percent, even as the construction industry has lost over 35 percent of construction jobs, around me.”

“American companies are ready to hire back crews if we can jumpstart demand for projects,” said Bracken Hendricks, Senior Fellow with the Center for American Progress, another author of the report. “Home performance contracting for energy efficiency is one bright spot on the horizon for the building trades today.”

The Center for American Progress’ report calls for an energy incentives program, like HOME STAR which promotes the investment in energy efficiency, for homebuyers. They argue that this will jumpstart demand for labor. More than creating new jobs, retrofitting old ones to include an emphasis on a green approach to building can give the economy a much-needed boost.

But this concept isn’t new. In October 2008, the Department of Energy put out a report stating the case for more energy efficient construction. Since 1980, the number of buildings has increased, and with it, our energy consumption. Electricity alone accounts the biggest portion of expended energy. From 1980 to 2005, the number of households increased by nearly 40%. But it’s not only the increase in the number of houses, they are also being built bigger and bigger, calling for more overall energy consumption. Energy efficiency is a prime goal and one that can positively affect construction.

As homeowners, we need to reduce our energy consumption and be more efficient with the home we have. With more emphasis on green building, more jobs can be created. And with more jobs, a growing economy. Now that’s the kind of green we can all relate to.

A home is a place that is supposed to be inviting, so aesthetics will definitely have to be considered. It would be great if you can get to choose a green roofing system that would also look good for your home.